The Abbott government plans a drastic overhaul of the higher education system, including axing the compulsory fee collected by universities to support student services and scrapping Labor's targets to lift participation by disadvantaged students.

The removal of the equity targets would disproportionately affect regional universities

Education Minister Christopher Pyne has also opened the door to re-introducing caps on university places, warning any loss of quality would ''poison'' the sector's international reputation.

Regional universities and the National Union of Students strongly oppose the changes, arguing they could lead to a loss of services on campus and limit access for poorer students.

The former Labor government abolished caps on the number of Commonwealth-supported university places, helping 190,000 more students to access higher education. This move to a ''demand-driven system'' sparked concerns from some about quality suffering.

In an interview with Fairfax Media, Mr Pyne said a review of the demand-driven system was one of his top three priorities for the higher education portfolio.

He would review the system ''to see if that is impacting on quality as some people believe that it has''.

''It's a very important reputation to maintain and the poison that would undermine that reputation would be a diminution in quality,'' he said on Tuesday.

''Quality is our watchword and we aren't bound by the previous government's policy decisions.''

A recent Grattan Institute report finding expenditure on the demand-driven system was expected to increase by nearly 45 per cent over eight years, costing more than $11 billion a year by 2017.

Mr Pyne said the student services and amenities fee introduced by Labor was ''compulsory student unionism by the back door'' and the Coalition would abolish it. Mr Pyne's other priorities were to restore the strength of Australia's international education market and cut tertiary sector red tape.

The Coalition government would make ''sensible, methodical reform'' to maintain the number of students going to university and encourage those from low socio-economic backgrounds. But the government would axe Labor's target to increase participation by those from low socio-economic backgrounds to 20 per cent by 2020, and to have 40 per cent of 25- to 34-year-olds holding a bachelor degree or higher by 2025.

Mr Pyne said he did not believe in "targets for targets' sake".

‘‘Labor is obsessed with targets," he said. ‘‘We’re obsessed with outcomes ... I don’t think a target adds to good government. I think it’s simply a 24-hour news cycle press release approach to government.’’

Caroline Perkins, executive director of the Regional Universities Network, said the fee was vital for the provision of services on campuses which may be a significant distance from a town centre. ''It's very important for us to get that support so we can provide students with the services they need,'' she said.

The removal of the equity targets would disproportionately affect regional universities, she said. The president of the NUS, Jade Tyrrell, said abolishing the services fee would be devastating.

The Howard government abolished compulsory student unionism in 2005. In 2011 the Gillard government allowed universities to collect the fee, which could be spent on non-academic items such as childcare, welfare, sport and recreational activities. .

Mr Pyne confirmed the Coalition would introduce legislation to implement more than $2 billion in savings to university funding and student support, as announced by Labor.